Barbarians at the Gate (90 page)

This time the debate was tense. Every man in the room knew the fate of the deal—and possibly their entire industry—was on the line. Fifty cents a share too much or too little could be the difference. Already the bidding had reached heights all but the foolhardy were uncomfortable
with. More than once that day Kravis and Roberts had talked about walking away from this deal. One wrong move could be fatal.

Scott Stuart sat on the couch beside Roberts, thumbing through a sheaf of computer runs, answering questions as Kravis went around the room. “Let’s just go home,” Stuart said. “We’re being jacked around here.”

Paul Raether wanted to stay, but could see no reason to raise their bid. “This is just bullshit,” he said. “I think we ought to tell ’em that’s all there is.”

Around and around the room they went, and when they stopped no one was surprised to find they were boosting their bid again. The verdict seemed unanimous. They would throw in one last raise, just fifty cents a share in cash, roughly $115 million.

“Is everybody comfortable with that?” Roberts asked.

All around, heads bobbed.

Then: “No, I’m not.”

The voice was Jamie Greene’s. For the second time in two days the young San Francisco associate would be responsible for initiating a shift in strategy. “I don’t know if we should do it at all,” Greene said. “But if we do, let’s do it with a dollar in cash. We’ve come this far. We want to win this deal.”

“I think he’s right,” Roberts said. “That’s exactly what we should do. We’ve gone this far. We’ve made up our minds we want to own this company. Let’s not get shortsighted now.”

Kravis agreed. Greene’s last raise was swiftly approved.

The last issue was a deadline. Once before Kravis’s group had forgotten it, allowing the process to drag on another six hours. They wouldn’t forget it this time. Someone suggested a half hour. Roberts voted for fifteen minutes.

“Nah, George,” Beattie said, “you can’t do anything in fifteen minutes.” Thirty minutes it was.

Beattie summoned Atkins and Rohatyn to hear the final bid. Kravis, sitting on the couch, spoke first. “You’ll now hear our final bid, and Cliff will read it to you.” He motioned to Robbins, who sat in a chair beside the aquarium. The young associate read out the new bid. Then he handed Atkins a merger agreement signed by both Roberts and Kravis. If the bid was accepted, Atkins was to return the agreement with Hugel’s signature.

“We want it back signed in thirty minutes,” Roberts said.

Kravis nodded. “We’re leaving in a half hour.”

His face blank, Atkins retreated, followed by Rohatyn. It was 8:15.

The fuse had been lit.

As he left, Goldstone turned to Jack Nusbaum.

“What do you think?” he said. “KKR?”

Nusbaum nodded.

Minutes later Rohatyn addressed the board. “Both bids,” he announced, “are between one-oh-eight and one-oh-nine. When you get that close, and when you’re dealing with securities in amounts that have never been dealt with before, in my business judgment these offers are essentially equivalent. They are both fair from a financial point of view. They are close enough that we can’t tell you one is clearly superior to the other.”

A dead heat.

It was the last thing the directors wanted to hear. Now they would have to make a decision. In their hearts every person in the room knew how the board felt. The problem was finding a legally defensible reason to feel that way.

To help the board make its decision, Rohatyn pointed out a half-dozen differences between the two bids. As the directors had long requested, Kravis had promised to leave 25 percent of the stock in shareholders’ hands; Shearson, despite repeated emphasis by the board’s bankers, opted for just 15 percent.
*
Kravis promised to sell only a portion of Nabisco;
Shearson would sell it all. Shearson’s failure to guarantee its securities via a reset was mentioned. So, too, was the management group’s inflexibility on guaranteeing employee benefits such as relocation expenses; Cohen wanted these matters to be negotiable with the ultimate buyers of RJR Nabisco businesses.

Like some financial smorgasbord, each board member now seized on one of the differences to justify his selection. John Medlin chose the reset. “Shearson’s ‘best efforts’ promise isn’t good enough,” Medlin said. “You don’t do that in a twenty-five-billion-dollar deal. We’ve got to know where those securities will trade.”

Nods all around. Al Butler thought of his friends holding stock in Winston-Salem and seized on the stock disparity. Juanita Kreps cited Kravis’s promises to treat employees more fairly. Bill Anderson liked that one, too. “Can I assume that KKR will look after employees better?” he asked.

More nods.

As they waited for the board’s verdict, Kravis and Roberts decided to blunt the crackling tension with a prank. Everyone inside the room picked up his coat and computer runs and, without saying a word, got up and walked out the door, past the bankers, and down the hall, as if to leave.

The bankers didn’t believe it for a second.

No one was crazy enough to leave now.

“We need another ten minutes,” he said.

“Ah, come on,” Roberts said. “We’re not going to do this.”

“Just bear with us,” Rohatyn said. “At this point, it’s clearly in your best interest to stay around.”

“Is this really ten minutes?” Kravis asked.

“Yes.”

“Fine,” Kravis said, “you’ve got it.” He wasn’t going to lose a $25 billion deal over ten minutes.

“Time is running out,” Hugel said. “Call for a motion.”

Marty Davis spoke first. “I move we award to KKR.”

“Second,” said John Macomber.

“All in favor,” Hugel said.

Hands filled the air.

“All opposed?”

No hands.

“The vote,” Hugel said, “is unanimous.”